MACD Rainbow Interpretation:
For color mode 1 - The benefit for the technical analysis is limited.This serves as a simple example of how vary the colors of one indicator with the results of another one.
For lour mode 2 - The color intensifies with an intensifying signal. A more and more intense violet shows that an increasing trend is weakening and that a downward reversal is probable. The red will appear when a downtrend is weakening and an upward reversal is probable.
For color 3 - This is a way to view the MACD colored by overbought and oversold signals. Bullish and bearish signals are given when the MACD histogram crosses over 0 and can be seen as intensified depending on the color reflecting an overbought or oversold state of the security.
MACD Rainbow Calculation:
The MACD Rainbow allows you to add colors to the MACD curve depending on the characteristics of the other indicators. This is a great example of how you can add a new dimension to your indicators by varying their color as a function of other indicators.
Return from MACD Rainbow to Using Indicators